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LEONARD, Jr. 



The Merchant Marines of 



the United Slates, England, 
France, and Japan 19004912 



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THE MERCHANT MARINES OF THE UNITED STATES, ENGLAND, 

FRANCE, AND JAPAN 1900-1912 

BY 

FRANK BONNER LEONARD, JR. 



THESIS 
FOR THE 

DEGREE OF BACHELOR OF ARTS 



COLLEGE OF LITERATURE AND ARTS 
UNIVERSITY OF ILLINOIS 
1912 



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UNIVERSITY OF ILLINOIS 




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THIS IS TO CERTIFY THAT THE THESIS PREPARED UNDER MY SUPERVISION BY 



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IS APPROVED BY ME AS FULFILLING THIS PART OF THE REQUIREMENTS FOR THE 



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TABLE OF COITENTS 

Page 

IKTBODUCTIQH 

I. EARLY HISTORY ANL PRESENT CONDITIONS 1 

II. NEED QP A MERCHANT MARINE 

(a) Relations to Foreign Shipping and Commerce .... Q 

(b) Relations to Navy and Army 12 

(c) Relations to the General Economic Development 

of the Country 14 

III. ENGLAND AND HER MERCHANT MARINE SINCE 1900 1 Q 

IV. FRANCE ANL EER MERCHANT MARINE 27 

V. THE RISE OF JAPAN 37 

VI. METHODS OF UPBUILDING OUR MERCHANT MARINE 44 

VII. ECONOMIC SITUATION IN UNITED STATES, ENGLAND, FRANCE 

ANL JAPAN IN RELATION TO THE MERCHANT MARINE 55 



UIDC 



MERCHANT MARINES OF UNITED STATES, EiJGLAND, FRAHCB AND JAPAN. 

INTRODUCTION 

The American traveller from the United States in Europe 
or in South America today is noted "because of his pride in his 
country and everything American, and it is often a grievous 
"blow to that pride to note, as he gazes on the forest of masts 
and the many flags that fly over the ships in the ports of 
these countries, the absence of the stars and stripes. And 
this is true not only of Europe, hut also of the great American 
ports of New York, Philadelphia or Boston. 

So strong has grown the feeling on this subject that "both 
houses of Congress have had since 1904 a merchant marine commis- 
sion investigating conditions and advising as to what may he done 
to rebuild our foreign merchant marine. 

It has been generally agreed that if this is done at once, 
government aid must be invoked, and in this connection that "ob- 
noxious" word "subsidy" is most often used. In order to make 
clear the meaning of some of the common terms that will crop up 
all through a discussion of this kind, it may be well to define 
a few of them. 

A subsidy is any form of government aid given to ship 
building or ship operating interests. 

A postal subvention is money paid to a ship company partly 
for services rendered in carrying the mails, partly for speed 
or other conditions, and partly as pure subsidy or aid. 

A naval or admiralty subvention is a sum of money paid by 
the government to ship owners in return for building and main- 
taining ships so as to make them available for war uses and 



giving the government a right to their services in time of war. 

Fisheries bounties are paid either on the number and ton- 
nage of boats built or on the poundage of fish caught. 

Shipbuilding or construction bounties are bounties paid 
to shipbuilding firms to encourage the construction of ships 
and the maintenance of adequate facilities for repair. 

A subsidy is never a payment for direct service rendered, 
but is always a gift from the government to stimulate trade or 
to aid in the national defense. 

It will be seen, though, that whether we call it subsidy, 
bounty or subvention, it is not a mere gift of money which is 
paid by the people of a nation out of the goodness of their 
hearts, but a sum of money expended with the expectation of 
gaining ultimately, benefits which outweigh the cost, often 
intangible benefits that cannot be computed in dollars and cents, 
such as pretige on the seas, stimulation of patriotism etc. 

With these definitions disposed of, we can pass to the main 
discussion of the problem before us in the United States. Then 
we will take up the history of the merchant marines in England, 
France and Japan, three nations who have tried some forms of 
subsidy with varying and differing success. Then we will try 
to compare the United States with these countries in the upbuild- 
ing of a merchant marine in view, and see what conclusions we 
can draw from their experience. 



1 



CHAPTER I. 
EARLY HISTORY AMD PRESENT CONDITIONS 
A country, lying along the shores of the ocean, with har- 
bor plentiful and secure, peopled "by a race that came original- 
ly from the bold Northmen and the hardy Saxon pirates, affords 
every inducement to the belief that its people will be a mari- 
time people. And in the early colonial, and later in the 
first period of our national life, the American people did not 
disappoint this belief. 

Almost from the beginning ships were built from the ample 
forests growing almost at the ocean's edge, the seams were 
stopped with pitch from the Carolinas and the sails were made 
by the diligent wives of the Hew Englanders. Whale fishing, 
smuggling, the slave trade and piracy were a few of the minor 
fields before the Revolution. Then came the daring exploits 
of John Paul Jones, and later the glorious victories of the 
War of 1812, achieved by a navy that was made after the models 
of merchant vessels. The rich harvest of the seas reaped 
amid the difficulties created by both of the contestants in the 
Napoleonic Wars are familiar to all. Until 1840 American ship 
builders were the best in the world and our sailing clippers 
held the speed records of the time. No seamen were so ef- 
ficient as ours, so that whiD e the wage paid American crews 
was far higher than the wage of European seamen, the cost of 
operating a vessel was much diminished by the fact that it 
required fewer hands to man a ship. ' 

But in 1840 came the steam engine and the first practicable 



attempts at steam navigation on the ocean. Steel commenced 
to supplant wood in the hulls of the ships. England saw the 
opportunity and specialized in the new kind of ships. The 
Yankee ship builders obstinately clung to their old wooden 
models, partly because they did not have iron and steel to 
adapt themselves to the new conditions. The hulls were con- 
structed with the greatest care and all the speed obtainable 
in a sailing vessel was surely attained by them. The fact that 
our tonnage increased against the adverse competition of the 
new type until in 1861 it stood at 2,496,894, the largest in 
the history of the country, is the most eloquent proof of the 
efficiency of our ship builders. But let us remember that 
this high mark was attained in the old type of ships and that 
these figures refer to foreign commerce, not our coastwise trade. 

The great Civil War left our magnificent merchant fleet a 
sad shadow of its former glory. The confederate cruisers 
like the "Alabama" had destroyed many of them. The shipyards 
had beer^L die so far as merchant vessel building was concerned, 
owing to the risk that this class of vessels assumed on the 
seas, and because they were kept busy in naval repairs to main- 
tain the blockade of the South, and partly because of lack of 
labor. 

Moreover the n country emerged from the war struggling be- 
neath the burden £t tremendous war debt and the knotty problems 
of reconstruction. While England was paying subsidies and 
aiding in every way her merchant marine, it seemed unwise to 
ask our government, staggering under an enormous debt to en- 
courage this branch of commerce. 



3 

Moreover the fertile prairies and vast almost unexplored 
wilds of the West really stood in greater need of government 
encouragement than our ships. Railways were needed sorely to 
bring golden grain to the eastern markets, and in the great 
surge westward to take freely of the treasures of a rich soil, 
attention was turned away from ship building. The merchant 
marine steadily declined until in 1898 the tonnage was only 
726,215, and most of that was in sailing vessels. The 
Spanish War demanded that we buy some ships for colliers etc. , 
and at the close of the war these were, in many instances, con- 
verted and sold as merchantmen, so that in 1905, our tonnage 
had^rose to 954,513. 

The figures quoted so far refer to our foreign merchant 
marine. The progress of our coastwise and inland water marine 
has been steadily upward until in 1908 it stood at 4,055, 295^ 
We have traced briefly the rise and decline of the merchant 
marine, let us now consider some of the attempts to check the 
decline through government help. 

With the advent of steam and iron in ship building and with 
the ocean peace following the long sea battles of the Napolaneonic 
Wars, came the transition from private to public carriers. That 
is, instead of having private owned ships which sailed wherever 
they were chartered for, we find regular lines of ships plying 
between certain parts on a relatively fixed schedule. In 1840 
the Cunard Line sent out the"Brittania" , a wooden paddle wheel 
steamer from Liverpool to Boston. They received $15,000 a 
voyage from the English government? The Inman Line, ten years 

1. Spears American Merchant Marine 298. 

2. Smith-Ocean Carrier 



4 

later followed the Cunard Line. In that year the first Amer- 
ican steam line, the Collins Line, was established. He re- 
ceived $850,000 a year in subsidies to meet the English sub- 
sidies, but an unparalleled series of unforeseen disasters 
destroyed the best ships of the line, and intimations of im- 
proper influence in Congress led to the abandonment of the sub- 
sidy in 18581 

Other owners asked for subsidies, and when they tried to 
run steam lines without them they either failed or were com- 
pelled to merge with the European companies. The few American 
sailing packet lines held on for a while but steam competition 
had sealed their doom. The North German L.loyde, the White 
Star Line and other foreign lines operating under subsidies, 
used steam for propulsion. 

Meanwhile the chartered steam ship traffic was rising slow- 
ly. The fast Yankee clippers survived in the tramp steamer 
trade much longer than in the packet trade. But in this line, 
even when there was a regular demand for a certain commodity 
from a certain country, such as tea from China or bananas from 
the Bahamas, regular freight lines sprang up. In 1855, for 
the first time, the Yankee tea clipper was beaten to London 
by an English steam tramp. While foreign countries generally 
did not subsidize these steam tramps, the inability of our 
ship builders to utilize steel and iron would not let us fol- 
low their example until it was too late, when our sailers, 
efficient in handling halliards and spars, were at a disad- 
vantage in stoking furnaces, and when ship builders had wait- 
ed until they had to compete with a settled business of foreign 

1. Smith- 126 

2. i"bid 123 



steamship builders. 

And so the numbor of ships declined with a rapidity that 
was only succeeded by our relative decline in the carrying 
trade of the world. A few feeble efforts in the way of reso- 
lutions were made in the form of subsidies between 1870 and 
1890, but Congress turned an indifferent ear to such projects. 
But in 1891 the government again took cognizance of the fact 
that our foreign merchant marine was almost nothing. England, 
Germany and France were paying large mail subsidies to all their 
mail carrying lines. So a bill was drafted to give bounties 

to the general marine but failed on a vote in the House. Fin- 
ally on November 3, 1891 a postal aid law was passed which is in 
force today. It is the product of a close paring process of 
the House of Representatives and provides rather meagre protec- 
tion against larger foreign subsidies. 2 

There are four classes of ships, based on tonnages of 
8,000, 5,000, 2,000 and 1,000 and on speeds of 20, 16, 14 and 
12 knots an hour. Only the fourth class can be wooden ships. 

But the subsidies were so small for the first two classes 
that that it did not pay to build vessels for them, and the 
Pacific Mail Line Company and the Red D Line with their third 
class ships were the only ones to avail themselves of it. The 
line to Brazil had to go out of business because of the severe 
competition encountered. 

In 1892, however, two British built ships of the Inman 
Line, owned by Americans, desired American registry and this 
was granted them on condition that two more vessels were 

,1. Bates- American Havi£;ation-347 

2. Marvin-American Merchant Marine 415-417 



G 

built in this country. These four vessels are the only ones 
which have come under the first class of the postal aid law of 
1891. Under this law, the officers must be American citizens, 
as well as a certain portion of the crew and must be available 
for war purposes. The reader will find the story of the aid 
rendered our navy in the Spanish War told most eloquently in 
Marvin's "American Merchant Marine." 

At the present time then, the. United States does have a 
system of subsidies to mail ships only, of a certain size and 
speed. It is generally conceded that these subsidies are 
too small to encourage much ship building in this country, 
especially as the high seas swarm today with foreign compet- 
itors. At the best the subsidy only aids line ships and 
not tramps. The further need of encouragement has been con- 
sidered in the attempted passage of the bill prepared by Senator 
Frye in 1905-06. It provides for aid to mailships under the 
present law, but with an increase of amount. 

In addition $5 a ton was to be paid for deep sea vessels 
of the tramp style. These bills will be criticized later. 
In 1908 the clause relating to freighting ships and bounties 
was omitted, but the increase in pay of mailships and the es- 
tablishment of more lines was provided for. Both of these 
bills failed of passage and today the merchant marine commis- 
sion is working on another. The original merchant marine 
commission of 1904 was composed of five senators and five repre- 
sentatives who took testimony in all the principal maritime towns 
from ship onwers, ship builders and miscellaneous nautical peo- 
ple. Their findings are embodied in a two volume report to the 



7 

House of Representatives. 

As we take a last look at the merchant marine from the 
purely historical side, we are struck with its brilliant rise 
and its sad decline. In the next chapter we will take up 

the question of the desirability of rebuilding and reestablish- 
ing something like our old time prestige on the seas. 



8 

CHAPTER II. 
MEED OF A MERCHANT MARINE 
Since 1900, the date which marks the advance of American 
manufactures into foreign markets, many reports from our consuls 
have drifted in showing the desirability of a merchant marine 
flying the American flag and establishing direct and regular con- 
nection between the United States and South America and the 
Orient. 

But it was in 1904-05, when Secretary of State Root made his 
tour through South America that the possibilities of a vast open- 
ing up of commerce to us were disclosed. From his extended and 
intelligent observation, Root indicated seven great basic matters 
whichAmericans must attend to, to secure a foothold in the mar- 
ket^nere. The seventh and most important is "It is absolute- 
ly essential that means of communication between the two countries 
should be improved and increased." 1 Germany, England, Norway, 
France, Japan, and other foreign countries have many vessels each 
year entering the ports of Rio Janeiro and Buenos Ayres, while 
in 1905, four little sailing vessels, two of them in distress, 
were the only American ships. 2 But it is not a mere sentimental 
difference of the flag. These foreign vessels belong to swift 
lines that ply regularly between their mother countries and South 
America. There is not a single regular line from New York to 
any port of South America, south of the Carribean Sea. 3 A number 
of slow, unreliable tramp steamers , under foreign flags, carry 
goods directly from the United States to this rich market. The 

1. Senate Document 1907-08 #225 p 15. 

2. ibid p is. 

3. ibid p 20. 



/ 9 
mails and more valuable cargoes are almost invariably shipped 
to Europe and then back to South America^ largely in foreign 
ships subsidized directly or indirectly by their governments. 
This makes it far more sure for the merchant of South America 
to order from the German or English houses who, in the first 
place can get the mail requesting shipment more quickly and 
then can get the goods to him promptly. If the Hew York 
merchant relies on the tramp, it will be a slow and uncertain 
voyage. 

The United States has direct mail lines under the Act 
of 1891 to Mexico and the West Indies, We send fifty per 
cent of the imports of these countries. 1 To South America, 
with a population of similar needs we sent fourteen per cent 

o^^^g^ppbrts in 1910 and this percentage is decreasing 
relatively. 2 With the opening of the Panama Canal the west 
coast of South America will be many miles nearer Hew York and 
Philadelphia than London or Bremen. 

As regards the present situation, John Barret, no?/ minister 
to Panama and formerly minister at Argentina, said in 1904, "The 
business men of Buenos Ayres can write to Europe and receive a 
reply in fifty days. It is very seldom that they can commun- 
icate with Hew York and Chicago and get an answer in less than 
eighty days." Hutchinson, special agent to Uraguay says, 
"There is no direct passenger service from United States to 
Chile on the River Platte .... The passenger service from 
the United States is greatly inferior in all respects to that 

from Europe, and the American people have little inducement to 

1. Senate Document 1907-08 p 19 

2. ibid 

3. ibid 60th Session #225 p 68. 



10 

visit and get personally acquainted with commercial and in- 
dustrial conditions in these South American countries." 1 

A. J. Sampson, American minister to Quito says, " I was 
informed by a prominent merchant here that freight rates were 
fivefold greater from New Yor^ to Guayaquil than from Hamburg 
to the same place."*' As has been often pointed out, it is 
only to be expected that subsidized and other foreign lines 
will use their influence to throw trade to their respective 
countries. 

Moreover a number of thinking men seem to believe that 
there is some magic about the particular flag which flies over 
the ship, that the ship acts as a sort of advertising medium. 
The Trans-Mississsippi Congress in 1903 passed a resolution 
"That every ship is a missionary of trade." 

There remains one more point at least to be disposed of. 
It is often pointed out that our foreign export trade has in- 
creased by leaps and bounds. On December 9, 1911 President 
Taft pointed out that we had just gone through a year of un- 
precedented increase in foreign trade. This condition would 
seem to indicate that there is no cause for alarm and that any 
money spent to revive a merchant marine would be a needless 
expense. The manufacturers allege that the number, or at 
least the size and volume, of manufacturing plants is on the 
same increase. It is a question of a few years at most until 
we must enter that life and death competition in which England 
and Germany are engaged now. 3 Many of the great industries 

1. Senate Document 60th Session #225 p 69. 

2. ibid p 70. 

3. ibid 1907-08 #225 p 19. 



of the country are tending to over-production, and relieving 
the situation by selling at prices even below cost. These 
merchants will seek foreign markets with increasing vehem- 
ence in the years to come and if, as so many point out, a 
carrying fleet of merchantmen will he almost a necessity, 
some expense may be justified. 

Japan and England, have most of the trade with China and 
the Orient. Both countries have subsidized lines running 
from Vancouver to Japan and the West. The Oceanic Company, 
an American corporation which'.arried mails under the Act of 
1991, went out of business in 1907, and thus stopped regular 
direct connection with Australia and Uew Zealand. 

The Chinese are opening up more and more as a nation and 
changing their standards of living. There is every reason 
to believe that it will yet become one of the greatest com- 
petitive markets. 

The Philippines and Hawaii are covered by the coasting 
trade restrictions, 1 but as yet no regular lines have been es- 
tablished, even under the extreme protection of the law. It 
is easy to believe that if a merchant marine would not do all 
that its admirers claim for it, it would at least be a strong 

help in the extension of our shipping and markets. 

2 

As Mr. Johnson points out, there are two great arguments 
for government aid to a merchant marine, commercial and econ- 
omic arguments and naval and military arguments. We have 
touched on a number of the commercial and economic aspects of 
the need of a merchant marine, let us now consider what naval 

1. Navigation Laws of United States 1907 p 238,244. 

2. Johnson, Ocean and Inland Transportation, 317. 



and military arguments can "bo adduced for it. The navy of 
the United States, consisting of dreadnaughts , battleships 
and cruisers, is not all of the fighting complement by any 
means. Without coal, these grim monsters would be like 
the proverbial dragon with his teeth drawn. 1 Colliers 
then are prime essentials to a strong navy. In times of 
peace the warships can coal at the home ports or in foreign 
ports, but in time of war, it is essential that each warship 
shall have a collier which can keep up with it and, as foreign 
ports are closed to belligerents in time of war, these colliers 
must be fast, strong seaworthy vessels. A strong subsidized 
merchant marine, built under specifications approved by the 
navy department furnishes just this kind of ship. Germany 
and England depend on their merchant marines for this service. 
In 1905 when our battleship fleet steamed around the world, 
American colliers could not be procured, so they were forced 
to hire vessels flying a foreign flag. The naval board, 
in the report submitted in 1905 by Admiral Bewey, stated 
that they were much hampered in the Spanish War by the slow- 
ness of the colliers, and against a more active and vigorous 
foe, this cumbersomeness might have proved fatal to success. 

But colliers are not the only branch to be considered. 
On page 3£ of the report of the Merchant Marine Commission 
will be found a long list of the types of auxiliary vessels 
that are absolutely essential to the needs of modern warfare. 
"Eight twenty knot scout ships" heads the list, vessels that 
must be fleet enough to outrace the fastest battleships. 

1. This field is covered in Senate Document 1907-08 #225 p 30-47. 



Ammunition ships, hospital ships etc. suggest other needs. 
Today we have eleven large ships in the foreign trade fly- 
ing the American flag which would be suitable for this pur- 
pose. We need over a hundred to give us any parity with 
England and Germany. The advantage of a merchant marine 
for this purpose lies in the fact that it can be used in 
times of peace to carry our commerce and thus they are kept 
profitably and. economically employed instead of waiting in 
idleness for war to commence. Then in the event of war, 
when they would be subject to seizure, they can aid the gov- 
ernment navy to the best advantage. It is quite a classic 
argument that since we are spending $140,000,000 a year to 
make our navy strong, we might spend from from three to ten 
millions to make our battleship fleet efficient like those 
of other strong naval powers. 

Since the United States has acquired insular possessions, 
their defense from the military point of view depends large- 
ly on the chances for quick transportation of troops. Ships 
should be of sufficient size to carry an entire battallion 
of troops with accoutrements, and a ship of this size is 
found only in the large merchant vessels of the deep sea type, 
rather than those of the type found on the Great Lakes on in 
the coastwise trade. It has only been since the Spanish War 
that the troop transport problem has arisen, but it is a prob- 
lem which must be solved if we are to be a world power from 
the military and naval standpoint. 

We have considered then so far the need of a merchant 
marine in relation to foreign shipping and commerce and in 



14 

relation to the navy and army. We shall next take up the 
need with relation to the general economic development of 
the country. 

The well salted old argument arises again and again to 
confront us, that we are allowing $200,000,000 a year in 
freight to go to foreign shipowners which would be saved if 
we built our own ships and carried our own goods. But the 
answer to this contention is that this large sum of money is 
only the value of part of the profits of these countries which 
have an enormous capital invested in ships to produce it. In 
the United States we have put our capital into railroads and 
western improvements which pay a higher return on capital 
than shipbuilding and operating in Europe. The same Solons 
of wisdom point out to us that immense bands of laborers 
would be put to work in our shipyards, but they must show, 
to establish their point, that these laborers are not being 
taken away from more productive industries than shipbuilding. 
The scope of this work does not permit me to go into a detailed 
history of shipbuilding in the United States. The facts in 
brief are that shipbuilding has been slightly on the increase 
since 1900, owing to the demand for lake vessels and ships 
for our coastwise trade. But since 1905 not one keel has 
been laid in American yards of vessels designed for the for- 
eign trade. The reason is simply, that we cannot compete 
with the Scotch and German shipyards. The government aid 
given to shipbuilding in these countries, which will be dis- 
cussed later, is one factor. But the three other factors 
are more potent. 



15 

1« It is claimed that materials can "be purchased more 
cheaply in England and Germany than in the United States. 
The dumping- of the American surplus steel products in conse- 
quence of the tariff may make steel sell at a price even 
below cost in Belfast while a high rate is maintained at 
home. This would seem to be met by the law which allows 
materials to be admitted free of duty. It would seem that 
the American shipbuilder could purchase steel in foreign mar- 
kets and import it. But the reason this is not done is, 
first, because of a further provision of the navigation laws, 
which prohibits vessels constructed of foreign materials from 
competing in the coastwise trade for more than two months a 
year, and secondly, the facts that the plates are often in- 
jured in transit from Europe to United States. Then the 
fluctuation of the steel market in a country with a tariff 
wall makes the construction of vessels in competition with 
English construction under a more stable market, more hazard- 
ous. 

2. Labor costs are higher in this country. It is often 
averred that a ship is nothing but a combination of bridge and 
locomotive, and since we construct these more cheaply than any 
other nation on earth, there is no reason why we cannot build 
ships more cheaply with our more efficient, if better paid, 
workmen. Higher wages are due in part to the high tariff 
wall which is only one of the many factors in the complex 
that make the cost of living higher in America. This is 
one factor which we must overcome when we get ships and com- 
mence to hire sailors. Americans in almost every wage-earning 



department demand more money than foreigners. There la no 
way to estimate the efficiency of American shipbuilding labor 
as compared with English and German, but there seems to be a 
decided opinion among authorities that American labor effic- 
iency in this line is not enough to offset the higher wages 
prevailing in this country. 

3. The lack of standardization in shipbuilding is keen- 
ly felt. When the European yards are turning out several 
vessels of the same type they can figure on piece work with 
their labor, which becomes more efficient as it has success- 
ive practice on the same kind of work. Much of the boasted 
superiority of American workmen is because of this duplication 
of work, the working out of the economic law of the division 
of labor. 

There was testimony before the Merchant Marine Commission 
to the effect that we build vessels for our inland waters more 
cheaply than ships of this same type were being built on the 
Tyne during the same period. But such statements must be 
taken with caution when we remember there is no sure test of 
comparison, because no foreign built ship can be purchased for 
our inland or coastwise trade. It would be rash to say just 
what would be the British bid for vessels of this type against 
American firms. 

In the building of battleships our shipyards have shown 
themselves very efficient. The Merchant Marine Commission 
state that we have built and sold ships for foreign navies 
in competition with bids from England and Germany. The large 
demands for vessels for our own navy have built up a condition 



(. 



of duplication closely approximating the conditions in the 
general shipbuilding industry in England or Germany. 

The question often arises (which will be treated more 
fully in the next chapter) , why do we want to revive a ship- 
building industry in this country when it is now suffering 
under all these disadvantages? One reason is that if a 
paying industry can be developed after it has overcome the 
initial disadvantage and inertia, it will add to the sum of 
the country's wealth. The criticism of this statement will 
be taken up more fully in a later chapter after we have con- 
sidered the foreign experience with subsidies. 



10 



GHAPTEK III 
ENGLiflS ASD HER MERCHANT MARIIiE SliJCE 1900 

The students of the merchant marine problem have always 
turned eagerly to the mistress of the seas to discover, if 
possible, the secret of her great success as a shipbuilding 
and shipping power. Each year has seen a steady increase 
in England, both of the tonnage operating under the English 
flag and the tonnage of ships built in English shipyards. 1 

The navigation laws of England are probably the most 
liberal in the world today. The coasting trade is not re- 
stricted as is the case in the United States, and vessels, no 
matter where built, are admitted to registry under the British 
flag. 2 

However, all ships receiving subsidies from the British 
government must fly the British flag and the Cunard contract 
of 1904 required that subsidized steam ships shall be built 
in the United Kingdom. 5 

Before entering into a discussion of the English subsidies, 
it will be well to note that England is an island with manufact- 
uring and commercial interests so overshadowing agriculture, that 
she is compelled to depend almost absolutely on foreign sources 

1. Foreign Trade of the Home Trade of the 

United Kingdom United Kingdom 

1900 0,290,000 Tons 1900 040,160 Tons 

1901 0,422,414 1904 066,078 

1902 8,627,090 1906 009,012 

1903 0,903,309 1907 940,130 

1904 9,160,021 

1905 9,361,750 

1906 10,100,547 

Report-Commissioner of navigation 1907 p 106-107 

2. House Document Volume 46 #564 p 43. 

3. ibid. 



19 

for food supply. Hence her supremacy on the seas is the only 
hope of her national salvation, and her liberal policy toward 
shipping from the earliest days of .English history is partly 
explained by this necessity. 

It would be interesting to go back to that early history 
and trace the rise of England through the navigation laws and 
fishery bounties; through the great period of her rivalry with 
American when the defeat of the latter was assured by the fall 
of the Collins Line; but we must leave this portion of our 
story to other writers. 

The year 1900 saw England with a merchant fleet of 34,875 
vessels whose tonnage was 10,751,392?- United States came 
next to England that year with a tonnage of 5,524,218. 2 German 
tonnage was 1,443,976 that year? Thus her nearest rival was 
far behind her, and the discrepancy is really much greater than 
the figures show, because only 900,000 tons under the American 
flag were engaged in the foreign trade while England had 
8,200,000 tons. Germany was insignificant then as compared 
with England, and France, as we shall see later, was going back- 
ward. 

In 1910 the tonnage of England was 19,012,294, United States, 
7,568,082 and Germany, 4,333, 186 f The important thing to not- 
ice is the rise of Germany, and it is a matter of regret that we 
cannot go into their history along these lines. So from the 
standpoint of tonnage of ships, England is still supreme. 

Let us now take up the subsidy system of England as it ex- 

1. Report-Commissioner of Navigation 1901 p 471. 

2. ibid p 9. 

3. ibid p 4Q6. 

4. American Year Book 1911 p 524. 



20 

ists today. 

l« In 1904 the British government passed a law making a 
yearly appropriation of 319,954 pounds ($1,500,000) for pay 
and allowances to naval volunteers serving on merchant and 
fishing vessels. This appropriation was made for twenty 
years. These men, mixed with the merchant crews and doing 
duty as seamen and officers on the ships, afford a valuable 
nucleus for a warship crew if the vessel is converted for war 
purposes. This money is a subsidy in that the ships are get- 
ting the services of the men without paying for them. 1 

2. The Cunard admiralty subvention under the twenty year 
contract, beginning in 1905, is fixed at $729,000 a year. 2 For 
this the Cunard Company places all its vessels at the disposal 
of the government in time of war and agrees that all ships built 
by them shall be done upon plans drawn up or approved by the 
Admiralty Board of England. 

3. The mail contracts are the most important item of the 
English subsidies. 

These mail contracts have been granted for three purposes, 
fa) To secure faster and more frequent mail service with other 
countries, (b) to encourage the building of merchant vessels 
that may be of service in time of war, (c) to strengthen British 
shipping that it may meet the competition of its rivals more 
easily. 3 

The legislation of the early part of the decade is large- 
ly the result of the House of Commons Report on Steamship sub- 

1. Johnson-Ocean and Inland 7ater Transportation, p 293. 

2. Report-Commissioner of Navigation, 1902, p 66. 

3. Johnson-Ocean and Inland T/ater Transportation, p 294. 



sidles, printed in 1901. This was the period of agitation 
for subsidies in America and the attitude of England toward 
any aid to a merchant marine in the Unitied States is indi- 
cated by questions 1918 and 1919 in this report. 

1918, "Would it be very difficult to compete successfully 
having regard also to the preferential rates in America? Ans. 
It would be very difficult to compete. 

1919, "Is not this law a very serious matter to British 
ship owners? 1 Ans. The whole question of this subsidy is a 
very serious question to British ship owners." 

In August, 1903 the Cunard subsidy bill was passed by the 
House of Commons by a vote of 92 to 18. 

The first provision of note was that the Cunard Company 
should build two large steamships, having a speed of from 
twenty-four to t.venty-five knots an hour to be run in its 
line between Liverpool and lew York or between other ports in 
Great Britian and the United States. 2 These ships were to be 
built in England under plans approved by the Admiralty Board. 
In fact all ships built by the company must be built in Jingland 
if they have a speed of seventeen knots or upwards. Eo charter 
party is allowed to be let out without notice to the admiralty, 
and provisions to project British citizens against undue dis- 
criminations are made? Part of the crews, including the of- 
ficers and engineers in charge of the watches, must be British 
subjects. Heedless to say, these vessels must all be registered 
under the British flag. 

On the two new vessels, pillars and mountings for guns were 

1. Report-Select Committee on Steamship Subsidies, 1901, p 114. 

2. Report-Commissioner of Navigation, 1902 p 225. 

3. ibid p 227-229. 



22 

provided for in the contract. m return for all these 
provisions the company was to receive 150,000 pounds per 
annum as mentioned under (2) above. 

The most peculiar feature, and incidentally showing how 
subtle may be the form that subsidies sometimes take, was the 
provision that the government should advance 2,600,000 at an 
interest rate of Ef per cent} This amount covered the cost 
of the two ships and so capital for this increased value of 
the Cunard shipping was received at a lower rate of interest 
than they could have obtained otherwise. if we take the 
interest rate as 4» it is easy to figure that this indirect 
subsidy amounts to 52,000 a year. 

The second part of the contract relates to the carriage 
of the mails, 68,000 pounds a year was provided for this; 
and advance of 14,000 pounds over the agreement of 1899? 

Some of the special resolutions of the Cunard Company, 
passed in 1903, show the attitude of the owners of the British 
merchant marine toward their government. Article two reads, 
"It is to be regarded as a cardinal principle of the company 
that it is to remain under British control and accordingly, 

fa) no foreigner shall be entitled to hold office as a di- 
rector or be one of the principal officers of the company. 

fb) Bo share in the company shall be held in trust for, or 
be in any way under the control of any foreigner or foreign 
corporation or corporation under foreign control. 

fb) of section two was put in to guard against the poss- 

1. Heport-Commissioner of Navigation 1903 p 229. 

2. Report-Commissioner of Navigation 1903 p £34*. 



23 

ibility of an amalgamation with the lately formed International 
Mercantile Marine Company which is controlled by American cap- 
ital. 

The Committee of the House of Commons on Subsidies said 
in 1901, "British policy has been to subsidize ships for postal 
or admiralty purposes only, and to exclude all considerations 
of trade interests"; but they also add "Even in the British 
case rapid postal communication has followed mainly the lines 
of great commercial traffic. 1 But while this is true, it is 
also true that fast mail communication has given a great stim- 
ulus to trade and paved the way for more frequent voyages of 
the unsubsidized merchant ships. 

The principal lines in England which receive subsidies 
besides the Cunard Line are the Peninsular and Steam navigation 
Company, the Orient Steam navigation Company, the Canadian 
Pacific Railway Company, the Royal Mail Steam Packet Company, 
the British India Steam navigation Company, and the Pacific 
Steam Navigation Company. 2 It has often been remarked that the 
combined tonnage of these subsidized companies is only an insig- 
nificant fraction of the total tonnage of the British merchant 
marine, so that, although it is an aid to have fast line, the 
great success of the British merchant marine is not due solely 
to it by any means. According to Royal Meeker, unsubsidized 
lines which run in competition with the above mentioned lines, 
pay, in some cases, higher dividends, showing either that sub- 
sidy leads to lax and Inefficient management, or that other and 
special factors place subsidized lines at a disadvantage. The 

1. Report-Commissioner of Navigation 1905, p 268. 

2. Report-House of Commons Commission on Subsidies, 1901, p 290. 



24 

White Star Line is generally supposed to pay higher dividends 1 
than the Cunard Line although the White Star Line gets no sub- 
sidy. The V/est India and Pacific Mail Steamship Company and 
the Royal Mail Company run over much the same route, yet the 
latter has earned five per cent dividends and the former twelve 
per cent? 

Still dividends are a poor basis to judge the prosperity 
of a company by and these isolated examples may not be fair. 
It is well known that profits instead of being paid out in 
dividends may be turned back into the business and reinvested. 
Such management is in many instances accounted better business 
than a sapping of the strength of a corporation by the paying 
out of profits to stockholders. 

True it is that the English government has ever turned a 
sympathetic ear to appeals from the big mail lines for state 
help and it seemed the opinion of the committee in 1901 that 
the policy of subsidizing ships was a wise one, to insure com- 
petition when it was threatened. 

It has been advocated that the relative shrinkage in the 
percentage of the world's commerce, carried by British vessels 
should be met by reserving the coastwise trade of the British 
Empire to ships flying the English flag, but this has not as 
yet been done. 

England has viewed with alarm the large number of English 
shipping firms taken over by the International Mercantile Marine 
Company in 190£. Any of the ships having mail contracts with 
the English government are required to fly the English flag 

1. Royal Meeker-Shipping Subsidies, p 39. 

2. ibid P 41. 



and remain under English registry. American financiers owned 
672,000 tons under the English flag in 1900. 1 In 1907, 329,837 
tons were transferred from the English to foreign control, while 
in the same year only 22,170 tons were transferred from foreign 
control to the English control. 2 

England today has many various items in her subsidy bill, 
which has increased steadily as the years have gone by, partly 
of course, because of the fact that services have increased, 
the pay for which is not differentiated from subsidy. In 1910 
the items were as follows: 3 

Subsidies and mail pay $3 320 454 

Cunard Admiralty ' 729*000 

Royal Naval Reserves 1 783*620 

Canadian Fisheries Bounties 'l6o'oOO 

Canadian Subsidies and Mail pay l 581*800 

Australian & Uew Zealand Subsidies 1*263' 600 

Cape Colony Subsidy '656*910 

Jamaica Subsidy 194*000 

In ship building today England easily leads the world. 
792,000 tons were turned out in her shipyards in 1907. 4 The 
standardization yards on the Tyne have been pointed to by 
American subsidy advocates as an example of what economies a 
healthy start may bring forth. However, these yards do not 
receive any government aid, while German yards and French yards 
do, yet the British shipyards are still supreme. 

In conclusion then we may say that England is not follow- 
ing at present a very extensive subsidy policy if we consider 
that policy with relation to her whole merchant marine. The 
indications of the past would lead us to believe, however, that 
did American adopt a subsidy system, England would be prepared 

1. Report-Conmissioner of Navigation, 1900, p 34. 

2 * iMd 1908, p 105-104. 

3. American Year Book, 1910, p 525-26. 

4. rieport-Oomniissioner of Navigation, 1908, p 103. 



2G 

to meet us with increased rates if her supremacy on the sea 
was threatened. 



27 

CHAPTER IV. 
FRANCE AMD HER MERCHANT MARINE 
The foes of subsidy triumphantly point to the experience 
of France to show us the shoals of national error into which we 
will fall if we attempt to "build up a merchant marine through 
the stimulation of government aid. 

We must go back to that father of French manufacturers, 
Colbert, to find the first working out of a protective system 
to upbuild a French merchant marine. 1 His system, copied after 
the system of the English Navigation Laws, existed with its 
many strict restrictions in slightly modified form until 1866, 
when Napoleon III, in the furtherance of his policies tending 
toward free trade, secured the passage of a law reducing the 
duty on foreign built ships, and admitting material for ship 
building free of duty, 2 but in 1872, following the economic pol- 
icy of France, which was again tending toward protection, the 
French Republic attempted to inaugerate a system of discrimi- 
nating duties in favor of French ships, but the threatened re- 
taliation of all the leading commercial nations, including the 
United States, compelled a suspension of the policy before it 
had been in force eighteen months. The Legislature next busied 
itself with a formulation of a policy of subsidies, which found 
expression in the law of 1881. 

Lack of space forbids our going into detail in the descrip- 
tion of these earlier laws, the provisions of which are very in- 
teresting and curious, and afford in many instances some of the 

1. Mahan- Influence of a Sea Pov/er on History, p 105. 

2. Viallates-How Franco Protects her Merchant Marine IT. Amer. Rev.p 184. 

3. House Document 59-1-Vol. 48-37. 



most glaring examples of human folly and extravagance. The 
leading provisions of the Act of 1881 amounted to a division 
of subsidies into construction and navigation premiums, lim- 
ited to ten yearsj This construction subsidy was calculated 
on the basis of the duty on the same material used in ship 
building if imported. While ship building was stimulated to 
some extent, the approach of the close of the ten year period 
brought about an almost entire cessation of work in the ship- 
yards. 2 

So in 1893 the Legislature busied itself in formulating 
a new law. This cut off bounties to foreign built ships, 
and increased construction premiums, which were declared to be 
a compensation for the charges imposed on ship builders by the 
customs tariff; navigation bounties were declared to be a com- 
pensation for the burden imposed on the merchant marine as an 
instrument for recruiting the military marine." The most pecul- 
iar feature of the law, however, was the relative preference 
given to sailing vessels in the form of higher premiums, on the 
theory that a parity of competition ought to be maintained be- 
tween steam and sailing craft, and because merchant sailing 
ships were regarded as the best school for seamen. 4 There re- 
sulted the strange phenomenon of a steady increase in the sail- 
ing fleet, that class of ships which the advanced nations of the 
world were discarding, while on the other hand, the number of 
French steam ships remained stationary? It was during this per- 

1. 3acon-Manual of Ship Subsidies, p 29. 

2. Engineering 81-583-Frer.ch Subsidies 

3. Meeker., T7ells. Our Merchant Marine, p 163 note. 

4. Engineering;, 81-588. 

5. ITorth American Review, p 184. 



iod that the bounty scandals reached their height and sailing 
ships were traversing the ocean in ballast alone and earning 
large dividends from the bounty. The ship owners complained 
that the ship builders merely added the bounties to the cost 
of construction and pocketed the moneys- 
It was this mismanaged and unscientific state of affairs 
which was in existence at the opening of the period which we 
are now considering. The obvious defects of the law led to' 
its supercession by another act further enlarging the bounty 
system. The Law of 1902 provided for three kinds of subsidies, 
fa) Compensation d' Armement paid to steam ships of foreign con- 
struction at the rate of ten cents for a minimum of two thousand 
tons to four cents, for four thousand to seven thousand tons per 
gross ton, total measurement, and per day of foreign trade under 
the French flag? fb) Prime k la navigation, paid to all French 
built ships at various rates per one thousand miles per ton gross 
measurement. There was no encouragement whatever for the build- 
ing of steam ships over seven thousand tons or for sailing ves- 
sels of over one thousand tons. Thirty million dollars was ap- 
propriated to last twelve years? (c) Prime k la construction 
for twelve years to cover ship building up to three hundred 
thousand tons gross of French built steamers and one hundred 
thousand tons gross of French built sailing vessels^ but the ap- 
propriation for the payment of the bounties, limited to guard 
against a too heavy burden on the national treasury was inade- 
quate to cover the tonnage mentioned in the bill, and so to 

quote Professor Viallates: "To be sure of profiting by the ad- 

1. Bacon- p 31. 

2. Engineering 81:588. 

3. ibid 589 

4. ibid 589. 



vantages of the law the ship owners hastened to order vessels 
and to place them on the stocks. Their haste increased when 
it was seen that there existed a considerable discrepancy be- 
tween the allowed tonnage and the money appropriated. The 
appropriation of one hundred fifty million francs open to 
assure the payment of the navigation and the compensation for 
outfit was much too little. The rush was such as soon as this 
formidable mistake was discovered that less than nine months 
after its promulgation the useful effect of the law was com- 
pletely exhausted." 1 

The last law on the merchant marine was passed in 1906 
and in considering it we shall take up the whole scheme of 
French subsidies in force at the present time. 

The first class of bounties which we shall consider are 
the bounties on ship building under the Law of 1906. The 
Trench maintained construction bounties not only to equalize 
the custon duties effecting the material . employed, but also to 
give builders a compensation sufficient to enable them to con- 
cede to the French ship owners the same prices as foreign build- 
ers. The rates are fixed on gross measurement; for iron and 
steel steam ships, one hundred forty-five francs per ton; for 
sailing ships, ninety-five francs per ton; these bounties to 
decrease annually by four francs and fifty cemtimes for steam ' 
ships and three francs ninety cemtimes for sailing ships, dur- 
ing the first ten years of the law's application, thereafter to 
stand at one hundred francs and sixty-five francs respectively; 
for engines and auxiliary apparatus twenty-seven francs fifty 
cemtimes per hundred kilograms? When a ship is enlarged with 
a viev/ to increase its carrying capacity it is paid a subsidy 
on the number of tons it has been increased. The above figures 
are for ships with hulls of iron or steel; for wooden ships the 
amount is less. The subsidies are put at a high figure at first, 

1. North American Review, p 184. 

2. North American Review p 184 , 1907, Yiallates. 

3. Engineering 81-589. 



31 

especially on machinery?" but are to decrease during the first 
ten years presumedly on the old Infant industry theory. Seven 
tenths of the construction bounties are payable when the ship 
is registered in French service, or started on effective trading 
if not in French service. The balance is paid to ships under 
the French flag only, two tenths one year after date of register 
and one tenth the following year. 2 Thus the purpose of this 
part of the law will be seen to be not only to increase the 
French built ships in the French merchant marine but to give 
French shipyards a world market. 

The third class of bounties which we shall consider are 
the navigation bounties and the provisions will be seen to have 
been made with a view of separating the ship builder from the 
ship owner, and thus, avoid the evil effects of the law of 1893. 
The navigation bounties to owners of French or foreign built 
ships under the French flag was calculated per day of actual 
running: for steam ships, four cemtimes per ton gross up to three 
thousand tons; three cemtimes more up to six thousand tons; two 
more for six thousand and above? for sailing ships three cemtimes 
per ton up to five hundred ton, two more up to one thousand and 
one more to one thousand and above? These grants depend on the 
miles made per day in relation to the ships' trial tests for 
speed; for instance, ninety miles a day for those which at their 
trials, obtained a speed of fourteen knots or over. For sailing 
ships the average run per day is to be thirty-five miles. The 

owners must certify that they have carried freight equal to one 

1. Engineering 81-589. 

2. ibid. 

3. Bacon 35. 

4. Engineering 589. 



32 

third their net tonnage at all times from the date of their 
leaving a French port to their return to a French port, and that 
freight has been carried over one third of the total distance 
run by the ship. 1 The minimum trial speed of all vessels re- 
ceiving subsidies must be nine knots. The total cost of the 
French bounty system in the twenty-four years from its estab- 
lishment, with the Law of 1881 to 1904 when the Law of 1902 
had practically run out was in round numbers upward of three 
hundred eighty-one million francs. It is estimated that the 
new law of 1906 will absorb eighty-four million francs in seven 
years. 2 

We now come to the last form of subsidy in France, the 
postal subvention. The amounts paid to mail lines are nominally 
for services rendered in carrying the mails, and transporting gov- 
ernment officials and state stores at a reduced price, but it is 
a well known fact that these amounts are far larger than amounts 
paid for like services in other countries, so we must agree with 
Royal Meeker that the greater part of the subventions undoubted- 
ly go to the ship builders and are, therefore concealed subsidies. 
There is no competition in the letting of mail contracts which 
to to four steamship concerns. 3 More than one half of the total 
steam tonnage of France is owned by these four subsidized lines; 
the Compagnie Generale Transatlantique , the Compagnie des 
Messageries Maritimes, the Chargeurs Eeunis, and the Compagnie 
Fraissant^ These subventions are both greater in amount and 

more influential upon ship building, navigation and commerce 

1. Engineering 81-509. 

2. 3acon-I7orth American Review 1907, Vol. 184, p 35. 

3. ibid P 36. 

4. ibid ^ 36. 



zz 

than are the general premiums upon ship building and naviga- 
tion. 1 These mail lines run to .New York, Quebec, St. Johns, 
Corsica, ports in the Mediterranean and Black Seas, Brazil, 
Indo-China, Japan, Australia, Africa and several British ports. 2 
It is a notorious fact that the four lines do not compete with 
each other, but pool their rates and bids in advance? The 
amount paid in subsidies for this service will be given later. 
There is one peculiar subsidy under the guise of mail contracts 
which has been concluded during the period which we are consid- 
ering and that is the Franch-Canadian subsidy Act 1904. This 
was let to two English and two French ships which were to run 
between ports in France and ports in the Dominion. The con- 
tract was for ten years, and the remuneration is $100,000 to 
$133,000 a year for eighteen voyages. 4 Thus having in mind 
the general outlines of the system, it will be seen that the 
weakness of the present law is one which has been found in all 
the previous laws, namely that its operation extends over so 
limited a time (twelve years in this case) , that not enough 
ships will be built in this time to receive subsidies which 
can be assured to the ship operators; this period should have 
been longer.^ Moreover, in spite of the obvious provisions, 
the subsidies have not enabled the ship builders to compete 
in the world market. 6 However, the provision that engineering 
works will only benefit by the law if they do not have more 
than ten per cent of foreign workmen, is recognized to be a 
good one, and also the provision that ships under the new law 

1. Meeker, p 67. 4. P.eport-Comnissioner of ITav. 1903 ,p 287 

2. ibid p 68-70. 5. Engineering 81, p 589. 

3. Bacon, p 36 6. ibid p 589. 



34 

can be built with a tonnage of over seven thousand and receive 
commensurate subsidy is a wise addition. 1 

Having now in mind the general history of shipbuilding and 
shipping subsidies, the following statistics of construction of 
ships and tonnage will show a close relation to the varying pro- 
visions of the different subsidy laws. The last form of govern- 
ment aid which we shall consider is fishing bounty. The act 
now in force to aid fisheries was passed in 1890 and provides 
for an annual bounty of fourteen, thirty or forty francs per 
man employed on a fishing vessel, depending on kind and location 
of the fisheries aided. There is a bounty on importation and 
exportation of fish. 

Tons of Vessels Built in France 
(Construction) ~ 
Sail Steam 
Ko. Tons Ho. Tons 

1890 18 6,896 IE 15,083 

1900 52 70,224 13 31,094 

1902 86 107,845 15 48,974 

1904 27 4,611 25 75,506 

1906 7 1,069 26 32,299 

1907 8 1,103 36 67,010 

Tonnage of France 

1850 1880 1900 1905 1906 

Steam 13,925 277,759 527,551 711,027 727 047 
Sail 674,228 641,539 510,175 676,193 487,'458 

Total tonnage in 1910, 1,882,280 

The bill for subsidies in 1908 for France was made up 

as follows: 

Navigation and Armament Bounties 16,079,500^ 

Mail Subsidies 5,217,037 

Ship Building Bounties 2,007,200 

Fisheries Bounties '120,' 000 



1. Engineering 81-509 

2. American Year Book 1910, p 526. 



13,423,737 



35 

When we compare this large sum with the $9,000,000 spent by 
England with her tonnage of 19,012,294, we should expect as 
a matter of logic that France would be a formidable competitor 
but such is not the case. In 1910 her total tonnage was only 
1,882,280* Although the tonnage of France has been on the 
increase, the French subsidies have been on a relatively larger 
increase. Thirty years ago, when the infant ship building 
industry knocked timidly on the doors of the Legislative Halls 
for aid to enable itself to get firmly on its feet to compete 
with England, he would indeed been a rash prophet, who would 
have ventured to voice the prognostication that the infant's 
demands would have grown to their present proportion. Royal 
Meeker says that activity and efficiency in the shipyards have 
decreased, that subsidies have sapped the vitality and soul 
from French maritime enterprise and left it a giant infant 
industry whose weakness increases with age. 2 Although labor 
is cheaper in France by one half and the general expense of 
construction less than in England, English efficiency turns 
out far more units of work for the same wage than the French? 
However, great shipyards have been developed, capable of build- 
ing the largest merchant steamers and armor clads and the naval 
reserve of merchant officers and seamen has been created. 4 
Consul General Skinner (U.S.) of Marseilles, says, "There is 
no doubt whatever but that the payment of subsidies has in- 
creased the number of French ships engaged in foreign trade. 5 

1. Bacon, p 36. 

2. Meeker, p 04. 

3. Engineering 81, p 589. 

4. Senate Report # 10, 59th. Congress, 1st. Cession. 

5. ibid. 



36 

We must also remember that the French are not inherently a 
maritime people and their struggle for a share of a consider- 
able portion of the traffic of the seas is met by the native 
aptitude of the English especially, who in the past, have 
signally defeated the French in many naval encounters. 1 Still 
the present French system can not be so iniquitous as some of 
its most virulent critics would have us believe, because Italy, 
with the same knowledge of the French experience has with a 
few improvements, adopted the same system. We may say in con- 
clusion that the story of France, taking into consideration 
the inherent character of the people, making due allowances 
for faults in the framing of the laws, rather than in the gen- 
eral theory which underlie them and remembering the fact that 
Italy and Japan, the merchant marines of which countries are 
generally conceded to be in a prosperous condition, have adopt- 
ed the same system, so far as essentials go; is not conclusive 
proof, but only strong evidence that subsidies are more a bane 
than a blessing to countries which are seeking a means to build 
up a merchant marine. 

X. 7,'ells, 164, House Document 4S #225. 



CHAP Mi V. 
THE RISE OF JAP AH. 
At the close of the Russo-Japanese War a new sun arose 
in the Orient to add its brilliance to the brilliance of the 
suns of other world powers. The astonished, and it must be 
confessed often, the troubled eyes of the great powers were 
fastened upon her. The great warship fleet of Admiral 
Rodjenvetsky had been utterly defeated. The glory of the 
victories of the island empire on land was equalled only by 
the deeds of her warships. 

The beginnings of shipbuilding in Japan are almost as 
romantic and unreal as the thousand and one legends that are 
woven around almost every national institution of Japan. In 
1854 the Russian ship Diana, lying at anchor in the port of 
Shimoda, was washed ashore by a vast tidal wave and demolished. 
The Russian captain, wishing to get his men back home as soon 
as practicable, decided to build new ships and hired Japanese 
workmen to aid in building them. These Japanese ship car- 
penters treasured the knowledge they acquired, and thus became 
acquainted with the western type. Many of these "foreign" 
models were built in the ensuing yearsf 

In 1870, responding to the repeated invitations of the 
emperor that any Japanese ship company which would establish 
communications with foreign countries would receive substan- 
tial aid from the government* the Kwaiso Kwaisha, (later the 
Japan Mail Steamship Company) was organized, and the ships 

1. Ueeker - 235 

2. Engineering 86:199 



of both these concerns aided the Japanese government material- 
ly in the Formosa Expedition of 1873. In 1886 an amalgam- 
ation of all vessels under the name of the Japan Mail Steam- 
ship Company was effected* 

The subsidy to this firm was at first in the form of a 
guarantee of eight per cent dividends, but this was commuted 
in 1887 to a subsidy of 800,000 yen annually? This enter- 
prising company made show but sure progress, enlarging its 
trade from the coastwise traffic to the near foreign ports. 
In 1892 it had a line to Bombay and its vessels were making 
isolated trips to Australia and the United States. 

On the conclusion of the Chinese War in 1894, when this 
line rendered the government efficient service, new bounties 
were granted it and its capital stock increased 2£,000,000 
yen ($16,500,000). 

The new 6,000 ton steamers were built, for the most part 
in the aiyde in England, though with a reserve of a sufficient 
number for Japanese construction to develop and advance the art 
of shipbuilding at home. 

During the Russo-Japanese War the vessels of this line 
were converted into auxiliaries for the navy, where they gave 
excellent service and contributed in no small degree to the 
wonderful victories of the new sea power? In recent years 

!• Engineering 200 

2. ibid 200 

3. ibid 86:199 



39 



the new ships have all been "built at home 1 . 

Another company is Asaha X. K. Company, established in 
1884. Until 1907 it maintained a line of steamers on the 
Yangtse River in China, but after the war these were not 
replaced. The chief interest for us in the fact that in 

1908 the keels of six 6,000 ton steamers for the American 
trade were laid in Japanese shipyards by order of this com- 
pany. It has always received government bounties and 
these new ships will furnish regular freight connection from 
San Francisco to Japan? 

The Oriental Steamship Company, another Japanese cor- 
poration, is now building ten 15,500 ton, nineteen knot 
steamers for the Hong Kong, Yokahoma and San Francisco run. 
These are vessels of the most modern type, equipped with 
Persian turbines and built for the most rapid conversion 
for war uses. 

One of the most notable tendencies in recent years is 
the heroic effort made by this astonishing people to start 
the shipbuilding industry at home. The problem would be 
enough to appal most people. There is little coal and 
few iron mines in Japan. But in 1901 a government foundry 
was started in one of the small southern islands where coal 

1. For convenience only the initials of the names of ships will be 
given. Since 1905 the the H. LI. , 6715 tons for European service. 

IT. M. 5539 tons for Australian service. T. LI. 7463 tons for American 
service six ships in 1908-1910, 8770 tons each for general trading pur- 
poses. Engineering 86:199 

2. ihid 203. 



and iron were found together. Other deposits have been 

worked up since then and in 1908 the Imperial shipyards at 
Yahosura got all their steel plate and channels at home. 
In the northern part of the island in 1909 and 1910 
American capital is working up a steel business from nat- 
ural deposits and the Japanese are hopeful that this prob- 
lem will be met in time. 

The interior of the islands is heavily wooded, so that 
timber is plentiful and cheap for their shipbuilders. In 

1906 there were two hundred fourteen private shipyards-^ 
which were engaged mostly in building small crafts. It 
has only been since 1900 that the Japanese have tackled the 
problem of steel shipbuilding, but even under the disadvantage 
of importing most of their steel and most of their machinery 
from abroad, couples with their lack of technical knowledge 

in this line, they have forged ahead. Following the Ship- 
building Encouragement Act of 1896 the output has grown stead- 
ily with an amazing adaptability to foreign methods. In 

1907 the launchings from private shipyards amounted to 73,000 
tons? 

But these improvements and advances have all received 
the hearty co-operation of the government. The first law 

1. Engineering 86:234 

2. Launchings for private shipyards. Engineering 06:234 

1900 10,763 tons 

1903 24,769 tons 

1905 32,858 tens 

1906 44,452 tons 

1907 73,632 tons 



41 

to aid the building and owning of ships in the "foreign 
style" was passed in 1870. The law at present in force 
was passed in 1896 and expires in 1914. Twenty-five yen 
per gross ton is paid to ships under the Japanese flag engaged 
in the foreign trade. They must have a tonnage of 1,000 

or over and a speed of ten knots or better. The payments 
vary with the size and speed, reaching a maximum of sixty yen 
for ships of 6,000 tons and seventeen knots speed. 7/hen 
steamers get old the amount is reduced. 

For competition with foreign companies special mail 
subsidies are given. Thus strong European, Seattle, 
San Francisco and Australian lines have been firmly estab- 
lished as indicated before. 

In relation to shipbuilding there is a subsidy for both 
hull and machinery. All ships receiving subsidies must be 

built as models approved by the Japanese Marine Bureau. But 
aside from subsidies Japan has a wonderful advantage over, 
not only the United States but also over England as well, in 
the cheapness of their labor. 

The average wages of the ordinary American seaman run 
around $30 a month. The average wage on a Japanese liner 

is |10 a month. At first the Japanese had American and 
British officers and largely a foreign crew, but the native 
Japanese soon picked up the trade and, as a general rule to- 
day, the officers and crews are overwhelmingly Japanese. 
They have no fights with labor unions and Chinese coolies 
can stoke furnaces far more cheaply than white men. 



There are 57,000,000 acres of timber in Japan which 
sells more cheaply than in this country. The labor to 
cut this timber up can be hired for $19 to $90 a year, less 
than what slave labor cost before the Civil Wart Labor 
in general can be hired for thirty-two cents a day, while 
we pay our skilled artisans in our shipyards #4 a day. 
The Japanese labor is getting more efficient every day as 
it uses the tools and methods of the West. 

In addition to these natural advantages, as has been 
repeatedly pointed out, all departments of the Merchant 
Marine receive subsidies. The result is that where the 

American Pacific Mail line, or the British Oriental and 
Occidental line can barely make profits, the Japanese com- 
panies pay handsome dividends. 

The price of the stocks of the two companies may be 
some indication of this. The Pacific Mail stock in 1907 
sold at 47i. The Japanese Mail Steamship Company stock 
sold at 300 or better in the Bourse at Tokyio 2 . 

E. S. Bogart says that it is only a question of time 
until the Pacific Mail Steamship Company will be compelled 
to transfer its vessels to the Japanese flag? 

There is one more factor that points to a greater re- 
presentation of Japan on the seas in the future, and that is 
the enthusiasm with which the people support the Merchant 
Marine policies and industries. There is a three years 

1. Foreign Resources of the Y/orld-Zan. p 30. 

2. Engineering 86:235 

3. World's T/ork 17:10940 



43 



course in the Imperial University of Tokyio in mercantile 
shipbuilding. In 1908 there were one hundred fifteen 
students in this course, studying foreign methods and models, 
and fitting themselves to be foremen and managers of the 
great shipyards. In the many technical schools of Japan 

special emphasis is being laid on shipbuilding. 1 

The one question that is puzzling is why subsidies 
should be longer demanded with all the natural resources of 
Japan. For 1910 the total was made up as follows: 



Mail subsidies $4,379,000 
Shipbuilding bounties 997^000 
Fisheries bounties 37^000 

One reason is doubtless that Japanese workmen have not yet 
become efficient and accustomed to foreign methods, and then 
there is the initial cost in the installation of new lines, 
and the making of new speed records for the mail ships. 
Students of the subsidy question will be keenly interested to 
see whether or not this amount will decrease in the years to 
come. 

At present Japan seems to have a brilliant future before 
her on the sea. It has been only in twelve years that she 
has arisen from a nation of a few junks to a world power with 
a Merchant Marine whose darkening shadow bids fair to sweep 
the American flag from the Pacific. If the intense nation- 
al enthusiasm does not decline, Japan seems certain to take her 
place with the world powers so far as her Merchant Marine is 
concerned. 

1« Engineering 86:199 

2m American Year Boole 1910 p 525. 



44 



CHAPTER VI 

METHODS OF UPBUILDING OUK MERC KMT MARINE 
So far, we have carried the history of American shipbuild- 
ing and shipping up to the present time, then we have looked 
over the situation in England, Japan and France, and have con- 
sidered briefly, some of the aspects of government aid by which 
these countries have stimulated the upbuilding, or the mainte- 
nance of their merchant marine. Let us now come back to our 
own country and consider some of the methods which have been 
proposed in order to rehabilitate the American merchant marine. 
We shall take up the discussion under three main headings; 

(a) Subsidy, or direct money aid to shipbuilding and shipping. 

(b) Discriminating duties, or the imposition of higher duties 
upon goods imported in foreign ships than upon goods imported 
in American ships. 1 (c) Free ships, or the purchase of ships 
abroad to be run under the American flag. Various modifi- 
cations, which will necessarily include the intermingling of 
the three methods will be taken up in connection with the one 
whose character is the most distinctive of the whole scheme. 

We might in this country encourage shipbuilding by direct 

bounties as it is done in France, and at the same time, by a 

repeal of our navigation laws, admit foreign ships to American 

registry, thus forcing our shipbuilders to compete with the 

builders of Europe. But such a course is rather undesirable 

and unnecessary, when all that we have to do is simply to leave 

alone our navigation laws and pay a sufficient subsidy to the 

shipping interests, which would cover not only the cost of oper- 
1. Bates-American Economist, 39-176. 



45 

ation, but also the increased cost of shipbuilding in this 
country as compared with Europe. The French system of direct 
bounties for construction has not been advocated in any bills 
placed before the Congress of the United States. This is 
probably due to the stronger pooular feeling against shipbuild- 
ing interests which have shown a tendency to become monopolistic, 
than against ship owning interests, which are compelled by their 
very nature to cope with international competition. 

Another form of susidy which has been suggested is a direct 
bounty of a fixed sum per ton, to all vessels built in America 
which will be run in the foreign trade for a certain number of 
days a year. This, as will be remembered, was part of the 
law introduced in 1901 by Senator Fryj2^ It was copied, in 
principle at least, from the French system. 1 The great ob- 
jection to this plan is its large cost, for though the bill 
contemplated only the expenditure of something like nine mil- 
lion dollars a year, Mr. Bates, after careful estimates had 
been made by him, decided that like the French law of 1902, 
this sum was entirely inadequate to build any substantial 
addition to our merchant marine, and that $40,000,000 would 
come nearer the cost at the end of the third or fourth year? 
We are confronted in the United States with the situation, 
that it costs from twenty-five to forty per cent more to build 
the ordinary tramp steamer in the United States than in England, 
and that to build up a real merchant marine the difference in 
the cost to overcome, under the present economic conditions of 
the country, will be larger than even the most optimistic advo- 

1. Bacon p 87. 

2. Sates, American Navigation, p 389. 



46 

cate of subsidies has dared to speak. 

There are other advocates oi* subsidies who would discard 
the idea of granting any direct government aid to the tramp 
and ordinary steamers, and would confine the subsidy to an 
extention of the act of 1891 alone. Such in fact, was the 
law before Congress in 1908 and 1909. It is believed that 
if we can establish a number of regular lines to South America 
and the Orient, and can build up a demand for American manu- 
factures in these places, that the natural demand for shipping 
to carry this commerce will lead American capital to undertake 
the enterprise unaided by the government. Some supporters 
of government aid have ingeniously suggested that we can pay 
subsidies out of the six million dollars a year profits which 
the government makes from the transport of foreign mail. This 
policy they say, will cost us nothing, but of course the fallacy 
lies in the fact that if you take away profits that would ordi- 
narily go into the treasury of the government you are really 
paying directly out of the treasury that amount in subsidy. 
So much then for direct and pure subsidy. 

Other writers, amongst them, Mr. W. W. Bates, seem to be 
afraid of the idea of giving the government money to the snip- 
ing interests, and they offer as a substitute the plan of dis- 
criminating duties. One statement of Mr. Bates should be 
challenged at the outset. He says "(that the adoption of 
discriminating duties) will thus build up a merchant marine 
without the cost of a single cent to the government or to the 
people of the United States. " According to his definition 

1. Bacon, p 07. 

2. Senate Document, GOth. Congress, Vol. 0, p 35. 



goods imported in American ships will pay a less duty than 
goods imported in foreign ships. That means, either that 
the revenue of the government will be depleted by a sum equal 
to the duties, or that the people of the United States will 
pay all additional duty on goods brought in in foreign ships. 
For in any event it is understood that the people of the United 
States will not benefit by this arrangement. There are three 
factors, the shipowners, the tariff and the domestic production. 
If the tariff is raised or lowered to provide for the discrim- 
inating duties, and domestic production goes at a lower price 
than that fixed by the tariff, the merchant marine will not be 
able to earn any duties because the people of the United States 
will buy at home, while if the price fixed by domestic produc- 
tion is the same as the tariff price, the people are still pay- 
ing for the discriminating duty which goes to the shipowners. 
Is not this then only another means of subsidy, possessing 
possibly the virtue that it is indirect, and will not be noticed 
by the people so readily? Yet after all it must provide the 
same amount of money as will be necessary to overcome the in- 
creased cost of shipbuilding and operating under the American 
flag. As Lyman Abbot says "taxes must come out of the public 
pocket", and the plan of Mr. Bates is only the plan for an in- 
direct tax. 

But it is urged such a plan is more easy of application, 
than a plan of subsidies, and affords a relief from the fear 
of corruption which has tainted the history of shipping in the 
past. It is urged that ships will have to automatically, by 
ceaseless energy and competition earn the aid which they gain 



40 

from the government. But this is only one phase of the ques- 
tion. In 1828 we concluded forty-six commercial treaties 
with the leading nations of the worlf and one clause of every 
one of those treaties provided that there should bu no dis- 
crimination in the way of duties against the ships of the powers 
with whom we were treating. Thirty-two of those treaties are 
in effect today, and every one of them must be abrogated before 
this system could be adopted. lotiee of this would have to 
be given a year in advance and it is doubtful if the return 
benefits which we receive at the present time under them could 
be secured under new treaties leaving out the reciprocity 
clause. 1 The experience of France in 187£, when she adopted 
discriminating duties, is particularly in point. It will be 
remembered that President Grant in connection with the other 
world powers immediately commenced a series of retaliations 
which led to the repeal in less than eighteen months of dis- 
criminating duties and the commitment of France definitely 
to the subsidy system? Mr. Bates speaks very lightly of 
these treaties, and still maintains that we are sacrificing 
more by enduring the present treaties than we would by their 
abrogation. Much reliance is placed by him upon the fact 
that previous to 1810 preferential duties were in vogue in 
this country, and that under them our merchant marine increased 
at a marvelous rate 3 . But, as has been pointed out the European 
wars of that period had almost stifled commerce and the American 
merchant marine only met a great natural demand that was willing 
to pay high prices for the carriage of goods'! 

1. Senate Document, 60th. Congress, p 78 3. Bates, Amer.ITav. p 442. 
Z ' lbld P 79 4. Scien. Araer. 1911, p 427 



49 

Moreover in this period there was no high protective 

tariff wall to make labor and shipbuilding materials high. 1 

But aside from the objection from the standpoint of reasons 

of state the law itself would be most unequal in application, 

and would fail to build up a commerce with those countries 

which we are most anxious to reach. The foundation of this 

whole system is the protective tariff, and yet one half of 

the imports of American today are on the free list. 2 This 

statement becomes more formidable when we consider the imports 

from South America, the country with which we are most anxious 

to secure more adequate communication. Seventy-five per cent 

of our imports from this continent 3 , or to make it more startling, 

ninety-eight per cent of the imports from Brazil are on the free 
4 

list and the adoption of the plan of discrimination duties 
would mean a revision of the tariff upwards to place a tariff 
on these raw materials in order that this scheme might work. 
As the situation is at present, the shipping interests, to 
receive the largest benefits would have to seek for cargoes 
from the manufactured products of England and Germany, which 
would be contrary to the whole industrial theory of our govern- 
ment. At the present time we are seeking to export our man- 
ufactures, yet to the European nations we could only carry 
such raw materials as copper, cotton, wheat, and corn. More- 
over it will be seen that no advantage will accrue to a ship 
in making a long voyage; that the ship which brings a cargo of 
tropical goods from the Bahamas will receive exactly the same 

1. ITot>le-Scien. Amor., 1911, p 429. 

2. Senate Document, 60th. Gong-, p 68. 

3. Arena, 1906 p 10. 

4. Senate Document, 1907, Vol. 8, p 69. 



amount as a ship which brings the same cargo from South America. 

The ship owners then will have every inducement to make many 

short voyages, while our trade with the Orient will be the last 

consideration with them. 

Some have urged a preferential rate on goods exported from 

the United States, but this vague phrase means that we must 
first have export duties^ which are unconstitutional. 

So we see in the last analysis that discriminating duties 
will cost almost the same amount of money as a direct subsidy 
with the additional disadvantage that it entails many cumber- 
some features which will tend to defeat some of the prime pur- 
poses for which a rehabilitation of our merchant marine has 
been urged. 

We now come to the third division of the remedies proposed 
to upbuild the American merchant marine, namely free ships. 
To repeal our century old registry laws and allow shipowners 
to buy or build at low prices abroad the ships needed for our 
commerce, seems at first glance an easy and inexpensive way of 
securing a large mercantile marine. 1 We shall discuss this 
proposition first from the standpoint of ships for our foreign 
trade only, leaving the restriction on the coastwise trade 
as it now is. The first objection that comes to mind is that 
which is pointed out in an earlier chapter; that a shipowner 
could not use his vessel in the coastwise trade when foreign 
trade was slack, and so his business would be enveloped in a 
great uncertainty. 

Other objections will be noted under the premise that we 

should adopt the policy of free ships for all our trade, foreign 
1. Senate Document 1907 Vol. 8 p 84. 



51 

and coastwise. One of the first things that would be appar- 
ent is that there are no provisions to meet or offset the ef- 
fect of foreign subsidies. A large part of this thesis has 
been devoted to the discussion of subsidies paid by practical- 
ly all maritime nations of the world today. It will be seen 
then that there must be the greatest economy in the operation 
of our ships to offset the aid given to foreign vessels, but 
when we turn to an analysis of this question we are confronted 
at once with the higher standard of living which Americans main- 
tain as compared with foreign workmen in general. 

And this is not confined to industries on the land alone. 
For the last eight years the reports of the commissioners of 
navigation have contained estimates of the wages paid seamen 
in American vessels, as compared with the wages paid seamen 
on foreign vessels, especially the English, and in every case 
it is seen that American wages are from fifteen to forty per 
cent higher. The wages in American shipyards, and we must 
remember that labor costs are about half the cost of construct- 
ing ships, are from fifteen to forty per cent higher than in 

2 

English shipyards. Moreover the American navigation laws 
provide for roomier quarters, and the food served on an Amer- 
ican vessel must be a better quality than that served on foreign 
z 

vessels'^ Thus it will be seen that we can look for no econ- 

omy in the cost of operation to offset the foreign subsidy. 
It may be urged that v;e could repeal all parts of the naviga- 
tion laws relating to decent provisions, to housing and feeding 

crews, that we could adopt foreign crews and foreign standards 

1. Senate Document 1908 Vol. 3 

2. ibid 

3. ITavication Laws of United States, 1908, p 91 R, S. 4612. 



.1 



of living. But in this case it is plain to sea that we 
would be getting, not an American merchant marine, but a for- 
eign merchant marine flying the stars and stripes. Even 
then there is no assurance that our flag would be seen upon 
the sea, for other countries would attract such ships by their 
subsidies which do not figure in any pure free ship policy. 
In fact such has really been the experience in this country. 
In 1908 the International Mercantile Marine transferred three 
of their ships to the Belgium flag, partly in order to get 
Belgium subsidies and partly to take advantage of Belgium 
standards of living. 

So we can see that free ships is indeed a plan which 
costs nothing, but it is also a plan which there is every 
reason to believe will give us nothing. The Merchant Marine 
Commission reviewed the shipping policies of all the leading 
maritime nations of the world, and. the following are some of 
the significant generalizations that they drew from such com- 
parisons : 

"To sum up therefore, it may be said that all the mari- 
time nations of the world have tried "free ships" in the past, 
and, disappointed with the results of their expedient alone, 
have now all turned to some form or degree of subsidy, bounty, 
or subvention. 1,1 

"This question was submitted to nearly all the experienced 
shipowners of this country (U.S.), "Do you desire 'free ships?" 
With only one or two exceptions, these practical men replied 
•1. House Document Vol. 49 p 43. 



53 

emphatically that they did not desire free ships . . .that 

free ships would, if adopted, prove a delusion and would be 

of no benefit whatever toward thu real development of an 

ocean fleet in the United States." 1 

"Free ships are not only discredited by the experience 

of the world, but are overwhelmingly opposed by the trained 

judgment of American shipowners." 2 

"It is only pottering with a great and vital question 
free 

to plead that a^hip policy will of itself enable American 
shipowners to meet the conditions with which they are con- 
fronted in the Pacific and Atlantic Oceans." 

"History contains no record of any nation which has be- 
come permanently great which bought or borrowed it ships from 
4 

a rival. " " 

This compromise might be suggested, that our navigation 
laws should be so modified as to permit the shipping interests 
to buy their ships where they could get them the cheapest and 
pay them a subsidy to operate. Such a policy as any policy 
of free ships would undoubtedly mean the utter ruin of our 
shipyards, which have turned out in the past the 25,740 ves- 
sels of 7,500,000 tons, flying the American flag today. This 
would mean also that there would be no repairing facilities 
to maintain such a merchant marine, and the merchant marine 
built up under such a system would be of practically no use 
in foreign war when foreign shipyards would be closed to us. 

To sum up, therefore, it appears that under present con- 

1. House Document Vol. 49 p 44. 

2. ibid p 45. 

3. Uarvin-Atlantic Llonthly Vol. 104, p 439. 

4. ibid p 440. 



ditions, there must be an expenditure of money somewhere, if 
we are to restore our flag to the seas, that a costless sys- 
tem would be a system barren of results, and so we come back 
to the old question; do we need a merchant marine badly enough 
to warrant the expenditure of money necessary to rehabilitate 
it. Before attempting to answer this question, let us brief- 
ly glance at the economic condition in the countries we have 
discussed, so far as they relate to a merchant marine. 



55 

CHAPTER VII. 
ECONOMIC SITUATION IN UNITED STATES, ENGLAND, 
FRANCE AND JAPAN IN RELATION TO THE MERCHANT MARINE. 
After wandering through this bewildering maze of expedi- 
ents which were proposed to build up our lost prestige on the 
seas, after tracing through the ramifications of laws which 
have succeeded each other with a rapidity that tells the same 
old story of legislative mistake, we ask, what are the great 
underlying bases upon which the maritime prosperity of a na- 
tion depend? VThat bed rock foundation must a country have 
to hope to build permanently for the future along the lines of 
merchant shipping? 

Professor Johnson says that success in building and oper- 
ating ships depends upon four conditions: geographic, economic, 
political and psychological. His able review of the situation 
in the United States so far as these factors go is the best 
summary that I have been able to find. 1 However, I do not ar- 
rive at the same conclusion after a careful consideration of 
the evidence. 

So far as a geographic basis for building ships is con- 
cerned, the United States seems well fitted for the task, 
The water frontage along the great lakes, the Atlantic, the 
Gulf and the Pacific is 7,300 miles, and the harbors are sit- 
uated at the maritime centers of commercial activities. More- 
over, these harbors are, for the most part, natural, and arti- 



1. Johnson, p 511, 

2. Johnson, p 312. 



ficial harbors have been, or are being constructed where need- 
ed without difficulty 1 . The coal and iron for use in ship- 
building are, taking into consideration the reduced rate of 
rail transportation in the United States, close to the Delaware 
Chesapeake and Lake shipyards. The harbors at these shipyards 
are deep enough to be used without dredging. 

The insularity of England coupled with its many harbors, 
some natural, others artificial, the remarkable facilities for 
shipbuilding on the Tyne in Scotland, facilities which have 
been enhanced by artificial works and dredging, makes it an 
ideal place geographically speaking when we remember that coal 
and iron are found in abundance at Newcastle and in North 
England, close to the seat of shipbuilding operations. 

France on the other hand, although she has good harbors, 
does not possess so many as England. But a greater disad- 
vantage is the fact that France does not have coal and iron 
mines to any extent and such mines as there are do not lie in 
close proximity to the shipyards. 

Japan, like England, is an insular nation made up of many 
islands instead of one. There are large numbers of harbors 
and the indefatigable labors of the Japanese aided by American 
capital are opening up iron and coal mines in the northern part 
of the island. If these mines lead to the foundation of a 
good iron and steel industry Japan may fairly be said to be well 
fitted geographically to become a successful shipping nation. 
And now passing to economic conditions in the four coun- 

1. Johnson, 313. 



tries, it will "be seen that so far as the United States is 
concerned, we are led to believe "by Professor Johnson that 
there are few hindrances in the way of developing the ship- 
building industry. At present the labor cost, which has "been 
referred to in former chapters makes it almost impossible to 
compete with England. Capital is abundant 1 and when the out- 
put is increased and specialization and division of lafcor can 
be carried further than at present this factor may be overcome 
as it has "been overcome in other industries. Tariff restraint 
must "be removed from all materials used in shipbuilding, even 
for ships in the coastwise trade in order that our shipbuilders 
may not suffer under a double handicap. 

But I can not agree with Professor Johnson that the higher 
of operation of American ships due to higher standards of liv- 
ing will be met by an equalization of social and other condi- 
tions on all ships of all nations. To say the least such 
equalization is not a matter of the near future, and if a sub- 
sidy were given at the present time as he advocates the chance 
of such equalization coming ahout would he made more remote 
"because the "better standard of living would "be insisted upon 
as part of our national policy. 

In England, a free trade country which can take advan- 
tage of the lowest prices in the competitive market, the econ- 
omic conditions are well suited for shipbuilding. Her ship- 
yards are standardized and except for the dangerous tendency 
toward the restriction of output by the labor unions, she is 
"by natural conditions fitted to be the ideal shipbuilding 
1. Johnson, p 316, 



nation. The wages paid English crews are somewhat higher 
than the wages paid other crews outside of the United States, 
hut the low class laborers such as stokers etc. are often 
.Norwegians and other low priced laborers. The lines to the 
Orient have Chinese and Japanese laborers in goodly propor- 
tion. The advantage of an early start in the modern methods 
of shipbuilding and shipping is a great one. 

France is like the United States, a country surrounded 
by a high tariff wall. Raw materials as well as manufactured 
articles are taxes almost indiscriminately. A bounty is an 
absolute essential in order to overcome the effect of tariff. 
But the French suffer under the additional disadvantage that 
the French workmen are not nearly so efficient as the English 
or Americans^ The French like the English get much of their 
cheaper labor from the low class labor of other countries. 
Additional disadvantages which might be classed as economic 
will be discussed under the psychological basis. 

Japan seems to be a poor country economically for the con- 
struction of ships. But she has two valuable assets, cheap 
labor and an abundance of forests. We have spoken of the iron 
and steel there. The labor on board ship is nearly all Jap- 
anese now and these people with their simple and frugal diet 
can live on a small fraction of what an American or European 
would starve on. The shipyards are becoming standardized 
and they are building more and more ships at home. Her fish- 
eries employ 500,000 people, who make good seamen and afford 
a ready recruiting ground for the merchant marine. 
1. W. L. George, France in the 20th. Century, 179-199. 



■OH turning to the political situation the United States 
seems to have a -firmer political basis for the development 
of a merchant marine than ever before in her history. Sec- 
tional animosity and bitterness have almost died out; if 
there is sectionalism today on this question it is between the 
agricultural middle western and the seaboard states. We are 
no longer a purely agricultural, but are becoming more and 
more a manufacturing nation. Our manufactures are seeking 
international markets. We have acquired insular possessions 
in the Pacific and Atlantic, and there is strong evidence just 
at present that the acquisition of Cuba is not impossible. 
Moreover, by the Monroe Doctrine we have assumed as semi-pro- 
tectorate over the South American states, and as pointed out 
before, ready communication is a strong bond of union and ami- 
ty. The building of the Panama Canal will accentuate our 
responsibility and our opportunity. - Our political ideals 
have become international, and in consequence we are settling 
quarrels for European nations. These political conditions 
are all most strongly conducive to the imperative demand for 
a larger tonnage of merchant shipping. 

The political reasons for a merchant marine in the United 
States apply with even more force to England. On her empire 
the sun never sets. Islands, peninsulas, and continents 
form part of her dominions, and a merchant marine is not a 
matter of choice, but of necessity. Her insularity and over- 
whelmingly preponderant industrialization make food supplies 
from abroad imperative. London is the commercial center of 



60 

the world. England has every reason then to encourage a 
merchant marine for political purposes. 

France does not possess so many nor so large colonies as 
England, but in both these points she ranks ahead of the United 
States. Still she has not assumed the political responsibil- 
ity which the United States has assumed under the Monroe Doc- 
trine. France is ambitious to hold her place with the world 
powers and so she encourages shipping. She is partly a man- 
ufacturing nation and must trade her manufactures for raw 
materials and some food stuffs. 

Japan as yet has not established many colonies, but her 
occupation of Korea, and the character of her preparations 
for aggression or defense is strong evidence that she con- 
templates assuming a more predominant position in oriental 
affairs. The insular character of her empire makes coast- 
wise communication necessary. She is becoming more and more 
an industrial nation and food stuffs and raw material will 
probably have to come largely from abroad in the future. Her 
people are ambitious to make Japan a first rate power, commer- 
cially as well as politically, and they are turning to a devel- 
opment of a merchant marine for this purpose. 

The last factor to consider is the psychological basis for 
the development of a merchant marine. I can not agree with 
Professor Johnson that our people feel the call of the briny 
deep as did our forefathers. He says the same blood courses 
in the veins of the modern American as coursed in the veins of 
our forefathers, but I submit that the comforts of the higher 



61 

standard of living have, so to speak, corrupted that "blood 
to the extent that the glamour, mingled with the hardships 
of a seaman's life do not attract our people as a whole so 
much as other industrial pursuits. The economic influence 
of a half century of development on land in its effect on 
the traits of character of the people is not easy to overcome. 
So psychologically we may say that on the whole it may he bet- 
ter to wait for some time and see if our people will adapt 
themselves to a return to the sea. 

On the other hand the English have always taken to a sea- 
faring life in the coast districts. There has "been no move- 
ment away from the sea in England as in the United States. 
The traditions of seafaring fathers are treasured in the minds 
of their seafaring sons, who are following the lure of the sea 
today. 

The psychological problem is hardest for the French. Their 
people, with the exception of the inhabitants of Bretaigne and 
Normandy are not, nor have they ever been a maritime people. 
Writers have often overlooked this fact, and have ascribed all 
the evils which have befallen the French merchant marine to 
subsidy, forgetting that the settled habits and traditions of 
the people do not fit them for the task. 

Had Japan been blessed with an earlier start I should say 
that she has a stronger psychological basis than any other of 
the nations. Her people are not so hardy, but they are in- 
tensely interested and sympathetic with anything that will aid 
the national weal. Her people are adaptive, as their marve- 



62 

lous rise on the sea shows. If this attitude doesnot change 
Japan should have a great future. 

In treating these topics space has forhidden that I should 
go into great detail, and I may have omitted facts which will 
appear to some to have "been more important than those included. 
I have tried to pick out those factors which lume up largest 
in their hearing on the question. To summarize it may he con- 
venient to group the nations in their order under each of the 
headings we have discussed. 

Geographical Economic Political Psychological 

United States England England Japan 

or 

England United States Japan England 

Japan Prance United States United States 

or 

France Japan France France 

If this summary is correct we may he better able to ap- 
preciate our former statement that the experience of France 
with subsidies is only evidence and not conclusive proof that 
subsidies cost more than they are worth. 

How that we are nearing the close of this discussion 
the reader may realize the hazzard of attempting to draw con- 
clusions from this mass of complex and conflicting evidence. 
But on the whole, I think we must agree that we must always 
say, "other conditions remaining the same", when we discuss 
the use of subsidies to build up our merchant marine. 

If the shipbuilding industry is established as advocates 
of subsidy say it would be,, it will add another large industry 
to competing industries in Germany, England France and Japan. 



G3 

There must "be an increased commerce to support the influx of 
new vessels or the shipbuilding industry of these other coun- 
tries must decline. It does not do to say that we will ship 
the good3 which now pay $200,000,000 a year freight charges 
to foreigners, on American ships, for the foreign ship owners 
will not sit idly "by and see their ships freightless without 
reducing rates and entering on a war, which a new merchant 
marine, "build up under the heavy costs of a new industry 
would be ill able to bear. 

Protective tariff in this country should have taught us 
a lesson to be cautious with appeals for infant industries. 
France has shown us how a bounty may make an industry feeble 
instead of strong. The people of this country remember the 
scandals of the promotion of the unsuccessful United States 
Shipbuilding Company, and when many of these same shipbuilders 
ask for a restoration of our flag to the seas, the people may 
justly be suspicious of their motives. 

After all it may be the wisest course to wait until the 
law of diminishing returns brings down the profits on capital 
to the level of profits abroad, and when the demand for ship- 
ping is strong enough, let American capital undertake the risks 
and build up our shipping industry naturally. Congress may 
aid by admitting shipbuilding materials free of duty, but the 
experience of history is not encouraging on the subject of 
bounties. 

America is proud today of her development, of the fact 
that she stands first in many things, and it may be galling 



to some of our people to think that other nations surpass 
us in the shipping of the seas. But we can not be first 
in everything, and until some more real and vital reason for 
the rehabilitation of the American merchant marine appears, 
we should go slowly in the advancement of government aid.